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Accounting 100C Midterm Exam Questions




Question;Question 1;Andy McDowell Co. establishes a $100 million liability at;the end of 2014 for the estimated site-cleanup costs at two of its;manufacturing facilities. All related;closing costs will be paid and deducted on the tax return in 2015. Also, at the end of 2014, the company has $50;million of temporary differences due to excess depreciation for tax purposes;$7 million of which will reverse in 2015.;The enacted tax rate for all year is 40%, and the company;pays taxes of $64 million on $160 million of taxable income in 2014. McDowell expects to have taxable income in;2015.;i)Determine the deferred tax asset & deferred tax;liability to be reported at the end of 2015.;Select one;a. 60,000,000;20,000,000;b. 20,000,000;40,000,000;c. 40,000,000;60,000,000;d. 40,000,000;20,000,000;Question 2;income is reported on the income;statement and is often referred to as income before income taxes. ______________________is reported on the tax;return and is the amount upon which a company?s income taxes payable are;computed.;Select one;a. Pretax financial;income, book;b. Taxable income;pretax financial income;c. Book, taxable;income;d. Pretax financial;income, Taxable Income;Question 3;Complete the following statements by filling in the blanks.;a)In a period in which a taxable temporary difference;reverses, the reversal will cause taxable income to be __________________ (less;than, greater than) pretax financial income.;b)If a $76,000 balance in Deferred Tax Asset was computed by;use of a 40% rate, the underlying cumulative temporary difference amounts to;$____________________.;c)Deferred taxes ________________(are, are not) recorded to;amount for permanent differences.;d)if a taxable temporary difference originates in 2014, it;will cause taxable income for 2014 to be _________ (less than, greater than);pretax financial income for 2014.;e)If total tax expense is $50,000 and deferred tax expense;is $65,000, then the current portion of the expense computation is referred to;as current tax _______________(expense, benefit) of $__________.;Select one;a. (a)greater;than,(b)$190,000,(c)are,(d)greater than, (e)benefit,$15,000;b. (a)greater;than,(b)$190,000,(c)are not,(d)less than, (e)benefit,$15,000;c. (a)greater;than,(b)$190,000,(c)are,(d)less than, (e)expense,$15,000;d. (a)less;than,(b)$190,000,(c)are,(d)less than, (e)expense,$15,000;Question 4;TMR Inc. reports the follows the following pretax income;(loss) for both book and tax purposes.;(Assume the carryback provision is used where possible for a net;operating loss). The tax rate listed;were all enacted by beginning of 2012.;Year;Pretax Income (loss) Tax Rate;2012;$120,000 40%;2013;$90,000;40%;2014;(280,000) 45%;2015;120,000 45%;What are the journal entries for years 2012-2015 to record;income tax expense (benefit) and income taxes payable (refundable), and the tax;effects of the loss carryback and loss carryforward, assuming that based on the;weight of available evidence, it is more likely than not that one-half of the;benefits of the loss carryforward will not be realized.;Select one;a.;For 2012;For 2013;Income tax expense;48,000 Income;tax expense 36,000;Income taxes;payable 48,000 Income;taxes payable 36,000;b.;For 2012: For;2013;Income tax expense;36,000 Income;tax expense 48,000;Income;taxes payable 36,000 Income taxes payable 48,000;c. For 2012;For 2013;Income tax expense;48,000 Income;tax expense 54,000;Income taxes payable 48,000 Deferred;tax asset 31,500;Income taxes payable;22,500;d.;For 2012;For 2013;Income tax expense;15,750;Income tax expense 36,000;Income;taxes payable 15,750 Income;taxes payable 36,000;Question 5;Leasing Co. leases a new machine that has a cost and fair;value of $95,000 to Buyer Co. on a 3-year noncancelable contract. Buyer Co. agrees to assume all risks of;normal ownership including such costs as insurance, taxes, and;maintenance. The machine has a 3-year;useful life and no residual value. The;lease was signed on January 1, 2014, Leasing Co. expects to earn a 9% return on;its investment. The annual rentals are;payable on each December 31.;Complete the amortization schedule that would be suitable;for both the lessor and the lessee and that covers all the years involved.;Schedule of Interest and Amortization;Rent;Receipt/Payment Interest;Revenue/Expense Reduction of;Principal Receivable/Liability;1/1/14;0.00;0.00 0.00 $__a;12/31/14;$__b;$__c;$28,980;$66,020;Select one;a. (a) 95,000, (b);$34,432, (c) $8,550;b. (a) 95,000, (b);$8,550, (c) $37,530;c. (a) 95,000, (b);$37,530, (c) $8,550;d. (a) 95,000, (b);$37,530, (c) $5,942;Question 6;AAA Company sponsors a defined benefit pension plan for its;employees. The following data relate to;the operation of the plan for the year 2014 in which no benefits were paid.;-Actuarial present value of future benefits earned by;employees for services rendered in 2014 amounted to $56,000.;-The company?s funding policy requires a contribution to the;pension trustee amounting to $145,000 for 2014.;-As of Jan 1, 2014, the company had a projected benefit;obligation of $900,000, an accumulated benefit obligation of $800,000, and a;debit balance of $400,000 in accumulated OCI (PSC). The fair value of pension plan assets;amounted to $600,000 at the beginning of the year. The actual and expected return on plan assets;was $54,000. The settlement rate was;9%. No gains or losses occurred in 2014;and no benefits were paid.;-Amortization of prior service cost was $50,000 in;2014. Amortization of net gains or loss;was required in 2014.;Determine the pension expense (amounts of components of;pension expense should be recognized by the company in 2014).;Select one;a. $133,000;b. $187,000;c. $52,000;d. $83,000;Question 7;Amnon Corporation reported the following for 2011;Service cost;$366;Interest on P.B.B. 737;Return on plan assets 593;Amortization of prior service cost 13;Amortization of net loss 154;Computer the 2011;pension expense.;Select one;a. $664,000,000;b. $677,000,000;c. $523,000,000;d. $1,270,000,000;Question 8;At December 31, 2014, Appleton Corp had a deferred tax;liability of $25,000. At December 31;2015, the deferred tax liability is $42,000.;The corporation?s 2015 current tax expense is $48,000. What amount should Appleton Corp report as;total 2015 income tax expense?;Select one;a. $17,000;b. $48,000;c. $90,000;d. $65,000;Question 9;JKF Corporation owns equipment that cost $80,000 and has a;useful life of 8 years with no salvage value.;On January 1, 2014, JKF leases the equipment to DHI Corp for one year;with one rental payment of $15,000 on January 1. What is the 2014 depreciation expense?;Select one;a. $8,000;b. $10,000;c. $15,000;d. $20,000;Question 10;Question text;Book basis of depreciable assets for Metcalf Co. is;$900,000, and the tax basis is $700,000 at the end of 2015. The enacted tax rate is 34% for all;periods. Determine the amount of;deferred taxes to be reported on the balance sheet at the end of 2015.;Select one;a. $544,000;b. $238,000;c. $306,000;d. $68,000


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